In terms of size alone, there are more than 2,100 MVNOs worldwide. Together they serve around 5% of the world’s 5.8 billion mobile subscriptions. 

In the last ten years, the sector has grown by 60%, which equates to around 800 new MVNO launches. By my calculations, that results in the need for 500 wholesale negotiations every year, either between new entrants and MNOs, or existing MVNOs renegotiating their contracts or attempting to change network partners.

With so many negotiations happening day to day, you’d think there would be plenty of knowledge on how to do it well and get the result you want. Sadly not.

Firstly, in my experience, many MVNOs approach wholesale negotiations with the wrong mindset. I don’t want to use the word haggle, but it’s probably the quickest way to sum up the problem. It just doesn’t work to go in thinking you can get a rock bottom price, and it won’t secure the deal you need for launch, growth or stability.  

A negotiation of any kind requires thorough preparation, which includes a full understanding of the host’s objectives. When you know what their strategy is you can show how your MVNO will help them achieve it. 

What’s more, this approach always breeds good relationships and respect, which is critical for developing a long-lasting partnership. 

There are five things we recommend you consider to get match fit. These are taken from our popular masterclass ‘The art of the wholsale deal’. 

1. Why would operators work with you?

As we’ve already said, knowing how you will help an MNO be successful is fundamental to your MVNO’s success. 

Many MVNOs spend weeks refining what they want from a wholesale deal but very little time understanding what the operator wants from them.

Operators typically enter wholesale partnerships for one of six reasons: 

• to monetise spare network capacity
• satisfy regulatory requirements
• access new customer segments
• enter new verticals
• drive wholesale margin growth 
• or simply prevent a competitor from winning the business

Your pitch should clearly demonstrate how your MVNO helps the operator achieve one or more of these objectives. The stronger the strategic fit, the stronger your negotiating position becomes.

2. What’s your pitch?

Before wholesale pricing is discussed, operators assess whether an MVNO is worth their time.

The sorts of things they look for are sources of credible funding, a differentiated proposition, realistic forecasts (easy to get wrong, hard to get right), access to customers, strong distribution channels, experienced leadership and a clear understanding of the technical and commercial requirements of launching a mobile service.

It’s clear from that list that you’ll need to present a compelling business case built upon robust customer insight. You must also have a realistic set of growth assumptions. This instils confidence in the team too. 

But remember, launching is one thing, attracting customers, keeping them and acquiring more is quite another. Be prepared for a lot of scrutiny at this stage. 

3. What levers do you have? 

The best negotiators enter the ring knowing what levers that have to pull. For a new MVNO, leverage may come from access to a unique customer base, a powerful brand, regulatory support or a proposition that addresses an underserved segment. 

But be aware that you also have vulnerabilities when you’re the new kid, like limited telecoms experience, forecasts that carry assumptions or a lack of technical or operational capability. Knowing how you bridge the gaps is important to show you’ve thought everything through and are in control of a strategy that can stand up to the challenges of trading. 

In comparison, trading MVNOs have (usually) proven they have the ingredients to be successful and are generating wholesale revenues for their host. 

It’s not all plain sailing though. Churn, acquisition costs and competition can all be a thorn in the side. 

Whatever your situation you need to be ready to justify your plans and show evidence it’s founded on data not a hunch. 

4. Is a low price really all you want?

The wholesale rate card and margin ire important for start-up MVNOs, but many of the most valuable elements of a contract sit elsewhere.

Access to new technologies, service level agreements, the pricing review process, clear frameworks for dispute resolutions and timetables for contracts reviews will all have a significant impact on long-term profitability, your ability to trade competitively and flexibility to move host. 

Make sure if 6G launches in the next 3-5 years you have access. Consider your plan for D2D satellite communications or eSIM. What if an AI customer management tool is made available by your host but you can’t use it? If you can’t get access to things that improve margin, proposition and customer experience then you significantly undermine all the efforts for launch. 

5. Are you ready to negotiate with professionals?

Wholesale teams negotiate every day. They use well-established negotiating techniques ranging from extreme opening positions and strategic concessions through to “good cop, bad cop” tactics and last-minute requests before signature. It’s a game you need to be ready to play. 

I know because I have sat on both sides of the table and written the playbook. In fact, when we deliver our masterclasses at conferences, the MNOs visibly blanche with embarrassment when we get to the part warning MVNOs of the techniques MNOs use. 

The best defence to these tactics is preparation. Understand your objectives, know your walk-away position, maintain alternative options wherever possible and remember that the goal is not simply to win a negotiation but to build a partnership that can support sustainable growth. 

And if you still don’t know where to start, get someone who does on your team. 

If you take one thing from this list, then it’s prepare. And do so strategically. You need a compelling proposition, a clear understanding of operator motivations and a contract that supports long-term success.

Whether you are launching a new MVNO or preparing to renegotiate an existing agreement, investing time in planning your wholesale strategy will almost always deliver greater returns than focusing exclusively on price.

Learn more about our masterclasses and how they can help you prepare here.

And if you want to talk specifics for a forthcoming negotiation or even appoint us as your negotiator then get in touch. It’s what we do.

The post The art of the wholesale deal: 5 things Every MVNO must do appeared first on Graystone Strategy.

Consumer customer growth will slow further

We’ve seen Covid-19 effect major launches so 5G handset supply was always going to be tricky this year, but this is quite a spanner in the works for any operator with desires to grow their 5G base in 2020.

It’s not helped by the fact that 5G is quite a niche proposition for consumers and that’s even for the really early adopters. We’re talking about the ‘Tech trailblazers’ (30% of the market) wanting 5G to begin with. That said, it’s not an insignificant number so the operators will have planned to attract them early to help showcase the possibilities, and get the revenue in the door. Their initial growth strategy will be pinned on business applications (see final point below) and these Trailblazers. But like 3G and 4G, 5G will go mainstream as more handsets become available and, in particular, once Apple is able to supply a decent quantity of 5G iPhones.

Network complications

Handsets is one thing, using it on a working network is another. This week’s decision will undoubtedly impact the speed of the rollout of 5G coverage. Networks have built plans around the availability and supply of Huawei kit, and now need to see if the more likely suppliers of Ericsson and Nokia through to re-emerging brands like Fujitsu, NEC and Samsung can help fill the gap.

Will they be able to make up the deficit quickly enough? My guess is it will be a perfect collision of not enough kit from any of them quickly enough, and delays on taking out the existing kit. That all adds up to a slower than planned growth of 5G coverage, and, as networks will ultimately need to extract the kit they have already installed, there will be disruption to existing 5G service.

Overall it’s going to be an interesting race between operators to change quickly and with limited impact to customer experience. And it’s a race it will be difficult to judge as networks seldom publish their plans in any great detail, so we won’t really know how they are progressing against the initial plan they had.

Will Customers pay the new 5G bill ?

The cost implications of replacing kit are most likely to be felt by consumers. The availability (or lack of) alternative base station kit may drive up market prices and therefore costs to deploy networks. Plus reversing out already purchased Huawei kit has a double whammy effect, the original investment is wasted and you are effectively installing, de-installing and re-installing which all has associated costs. That has to be financed somehow and while I don’t expect data pricing to go up I do expect data pricing to stabilise and the steady decline we’ve seen over the last couple of years slow down.

It’s very likely this will cause some networks to re-evaluate their 5G pricing strategy. Consumers should therefore expect 5G to be at a premium in terms of handset costs and possible the available tariffs for 5G.

But as ever, it always pays to shop around. MVNOs like Sky Mobile (on the O2 network) already have access to 5G and with recent developments in the MVNO and MNO market, and the announced merger between O2 and Virgin we may see some good deals in the short term.

What do consumers think and what will they do?

The news has made every front page and it’s likely consumers will now be concerned about buying Huawei branded devices as a result. They are likely to think more about the trade-offs than they usually would when investing in a new phone.

Huawei is likely to extend its range of very cost effective 5G devices competing against the more expensive Samsung or Apple (once available). It remains to seen whether price over perceived security wins out.

My hunch is customers will take longer to adopt 5G anyway, simply because we have a shrinking economy and people will be keeping an eye on their discretionary expenditure.

MVNOs left in the cold?

All the complexity in the practicalities of delivering 5G and the added pressure on economics might have mid-term consequences for MVNOs. The big question is will operators offer market parity to their partners? A delay in parity would help ensure 5G is synonymous with the big networks. Yet, MVNOs exist for the very reason that there are sets of customers operators will never reach. Extending 5G to MVNOs early (as some Operators have already done) could boost market traction.

It would not be a huge surprise if Operators take this opportunity to review the 5G MVNO strategy and whether they can delay MVNO access. Their cost base has changed significantly so the question is, do they drive for volume and include MVNOs or pursue a premium strategy for their direct customers only?

I imagine wholesale and finance teams are working intensely on business case calculations now.

Private networks may stall

Finally, we can’t look at the ramifications without talking about the impact on enterprise. This is where the real 5G business case lies, helping companies become more efficient and innovate. Any delay to 5G means a delay to some aspects of digital transformation, which is a strategic imperative at the moment.

The development of private networks, which is probably one of the most interesting use cases, will also take a hit. Private networks are not covered by the legislation but as Huawei has targeted this market and built some innovative RAN solutions I can see another potential problem.

All businesses are very concerned about security and data protection in line with legislation, and as a matter of reputational necessity, so I imagine any business in need of a private network, will be intently reviewing the perceived risk, seeking alternative suppliers and again increasing demand on more expensive alternatives to Huawei. The question is will that blow the business case?

As you can see there’s a lot at stake and as the points above show the strategic choices operators face are complex. From performing technical change through which propositions to define and price first, to whether to launch with MVNOs.

Few will have predicted the scenario five years ago, but real it is and it won’t be reversed. Navigating the short-term upheaval for long-term gain is now the name of the game.

If you need help working through your strategy in response to these changes then get in touch.

The post Six consequences of the Huawei ruling appeared first on Graystone Strategy.